Self employed, how to get your home loan approved

Self employed, how to get your home loan approved.

If you have ever tries to find a mortgage or home loan while being self employed you might understand the difficulties found when self employed workers wish to attain a home loan to buy a house. The challenges for self employed are the same as that for those employed in companies or for individuals plus some extra difficulties to deal with. Some people are so conscious of the difficulties of getting a home loan without providing a monthly pay slip that they don’t even try. This causes many self employed workers that have the right circumstances to buy a home to never do so and pay rent for decades and decades without having anything to show for it. This article will aim to point out some of the main obstacles for self employed getting approved for a home loan and some possible solutions.

Why aren’t mortgage companies in love with self employed workers?

While it is true that mortgage providers demand more documentation and clearer proof of collateral to self employed workers it is not true that mortgage providers and banks will automatically deny loans to self employed. On the contrary, banks and lending companies are eager to approve any home loan that fulfills the basic requirements. So it is not that mortgage providers don’t like self employed borrowers it’s just a matter of providing them the security and proof of income for them to willingly approve all the loans you throw at them.

What can I do to qualify for a loan if I’m self employed?

As usual there is not a simple, tidy all encompassing answer to that question. It varies from country to country, region to region and even bank from bank. But there are some general guidelines that will help. In fact it is probably more useful to turn the question on its head. What do bank and lending companies require to approve a loan?

One must remember that most bank and lending companies workers work on a commission basis. The more they sell the more money they make. So if they can sell you a loan and be within their guidelines they will. What are these guidelines?

Again, they change. Some constants exist though. Banks and lending companies will set brackets that qualify what percentage of the value of a house can be provided for a loan depending on the security or collateral provided. If you are self employed and don’t have an awful lot to put out as collateral in case you fail to pay your mortgage you can’t expect a 90 % or even an 80 % loan. This means that self employed borrowers do have more reasons to save than other as their own savings will be instrumental in buying a home. The flip of this is that you will pay less interest.

The other step self employed workers can take is to provide a faithful report of tax payments and business accounts as a solid business history can be of great help in proving income and willingness to pay a mortgage.